Termination of Employment Due to Expiry of Work or Contract Period

When the duration of the employment contract is determined by the scope of the work, the completion of the work results in the termination of the contract. If it is proven that the contract was made for a specific task, the completion of the work is a factual question to be proven by evidence. If the employer can prove that the work is completed, the employee is not required to show that they were hired for more than the specific task they were performing.

In Supreme Court File No. 43848 (Appellant Adika Tour and Travel Agency PLC and Respondents Ato Asmare Belay Aragaw et al. (3 persons), July 7, 2001 E.C., unpublished), the respondents were hired to renovate a house that the appellant had purchased for renovation and rental. Their employment contracts were terminated upon the completion of the renovation. The Federal First Instance Court, to which the suit was filed claiming unlawful termination, ruled that the contract was unlawfully terminated because the appellant failed to prove that there was a clear agreement between the parties that the respondents were hired only for the renovation of the said house, even though the work was completed. The appellate court upheld this decision, stating that it had no defect.

The Cassation Bench, in overturning the lower courts’ decisions, criticized that there was no claim or argument by the respondents that they were hired for other work beyond the renovation of the said house. Furthermore, the court’s decision that “the appellant failed to prove” in the absence of factual findings by the court during the litigation process was deemed “inconsistent with the arguments presented.” The completion of the house renovation terminates the employment contract in accordance with Article 24(1) of the Proclamation.

If the employer fails to prove the completion of the work, it does not mean that an employment contract made for a specific task can be terminated at any time. In Supreme Court File No. 25765 (Appellant Hailemichael Yihdego and Respondent Ato Girma Ayele, October 7, 2000 E.C., Vol. 6), this fundamental point was clearly highlighted in the Federal First Instance Court’s decision, although it was overlooked by the Cassation Bench. In this file, the respondent was hired for house plastering work. Following the termination of his employment contract by the appellant, he filed a suit requesting reinstatement or payment of various benefits. The court, noting that the appellant failed to prove that the respondent was dismissed due to the completion of the work, ordered the payment of the claimed benefits, and the Federal High Court upheld this decision on appeal.

The Cassation Bench, reviewing the case in cassation, overturned the lower courts’ decisions by merely considering that the employment contract was made for a specific task, without examining the issue of whether the work was completed or not in light of the lower court’s decisions and the appellant’s cassation appeal. Regarding the legality of the contract termination, the court stated the following in its decision:

“The respondent was hired to do plastering work for a house that the appellant was building. When the plastering work is completed, the employment contract also terminates (Article 10(1)(a)). While it is known that this agreement existed between the two, the lower court’s decision that the appellant failed to prove that the respondent was dismissed due to the completion of the work did not consider that the law, as stated above, stipulates that an employment contract can be made for a specific task.”

The lower courts were also aware that an employment contract made for a specific task terminates upon the completion of the work. The termination of the employment contract was deemed unlawful because the respondent was dismissed before the work was completed. The fact that the law stipulates that the employment contract terminates upon the completion of the work (when the house plastering work is completed) does not, in any way, indicate the completion of the work.

If the work for which the employee was hired is completed, the contract terminates by operation of law, and the employer is not obligated to provide a termination letter or notice. This, in turn, can give rise to a different cause of action in labor disputes. When a contract terminates by operation of law, the employee’s options are to file a suit claiming unlawful termination or to demand payment of wages by assuming the employment contract is still in force. If the court to which the suit for wage payment is filed confirms that the employment contract was made for an indefinite period, the claim will be accepted. Conversely, if it is proven that the employment contract was made for a specific task and the work is completed, the claim will be rejected as there will be no wages payable after the contract is terminated.

In Supreme Court File No. 43836 (Appellant Ethiopian Electric Power Corporation and Respondents Ato Asfawhun Fantahun et al. (3 persons), July 28, 2001 E.C., unpublished), the respondents were hired to lay electric lines and, after completing their contract and probationary period, became permanent employees. However, the appellant stopped paying their wages, and they filed a suit demanding payment of wages and daily allowances. The appellant, in its response, argued that the respondents were hired for a specific task, and since the line-laying work was completed, there were no wages or daily allowances payable to them.

The Dawro Zone First Instance Court of SNNPRS, to which the suit was filed, ordered the payment of wages and benefits to the respondents for the period from July 1, 2000 E.C., to December 14, 2001 E.C., and additionally ruled that “they can work if they wish.” The Dawro Zone High Court, which heard the appeal, upheld the decision, stating that it had no defect. The Cassation Bench, noting that the completion of the work was confirmed even by the respondents’ arguments, and that the employment contract was terminated in accordance with Article 24(1) of the Proclamation, ruled that the respondents could not raise any claim for rights, and overturned the lower courts’ decisions.

Article 10 of the Proclamation enumerates the circumstances under which an employment contract can be made for a specific task or period. Among these, Article 10(1)(a) directly relates to a specific task, stating “until the completion of the specific work for which the employee was hired.” In addition to this provision, an employment contract can be made for occasional work, seasonal work, or sometimes for work performed intermittently. Although, unlike Article 10(1)(a), there may be continuity of work in these situations, Article 24(1) will apply when the work is completed. Therefore, a daily laborer who works intermittently, receiving daily wages only when there is work, will have their employment contract terminated when the work is completed. (Appellant Commercial Bank of Ethiopia and Respondents Ato Alemayehu Kebede et al., October 12, 2000 E.C., File No. 29692, Vol. 6).

The court’s decision that an employment contract made under sub-provisions other than Article 10(1)(a) terminates upon the completion of the work precludes arguments that could be raised based on the continuity of the work. Intermittent or occasional work, as well as seasonal work, recurs. For example, loading and unloading work in certain organizations exists intermittently throughout the year. Although not explicitly discussed in File No. 29692, it can be said that the court’s decision implicitly accepted that the recurrence of work made for occasional or intermittent work after a certain period does not render the termination of the employment contract unlawful.

However, the criterion for determining the completion or cessation of work in these situations should not have been overlooked. When is intermittent or occasional work, as well as seasonal work, considered completed? For example, if intermittent work that occurs every two, three, four days… or weekly is a permanent work of the employer, there will be no time when it is completed, only when it is interrupted. If this is the case, can we say that the work is completed at each interruption? Should we consider intermittent work, performed only when needed, as completed when it is temporarily suspended? These questions, fundamental and contemporary issues of labor law, should have been thoroughly examined in File No. 29692 but were casually overlooked.

Project Work

When an employee is hired for a specific project, the completion of the project results in the completion of the work, and therefore, the employment contract terminates in accordance with Article 24(1) of the Proclamation. To state that an employment contract related to project work has been terminated by operation of law under Article 24(1), two preconditions must be met simultaneously:

1. It must be proven that the employee was hired for a specific project, not for the employer’s general operations.
2. The project must be completed or finished.

Let’s examine these points in detail in light of Cassation decisions.

Specific Project

When examining the legality of employment contract termination related to a project, it must first be proven that the employee was hired only for the project they are working on, before determining whether the project is completed or not. An employer does not only hire new personnel specifically for a project to complete it. Employees who have an indefinite employment contract with the employer and are hired for the organization’s general operations may also participate in the project. There is no legal basis for terminating the employment contracts of these employees upon the completion of the project.

In Supreme Court File No. 48648 (Appellant Tsalqe Education and Integrated Development Association and Respondents Ato Tatek Dejene et al. (2 persons), February 24, 2002 E.C., Vol. 9), the Cassation Bench interpreted that if it is not proven that the employment was made for a specific project in accordance with Article 10(1)(a) of the Proclamation, the termination of the employment contract due to the closure of a project will be unlawful.

Completion of the Project

While the completion of a project always legalizes the termination of the employment contract, its non-completion does not necessarily indicate unlawfulness. It can be lawful or unlawful depending on the reason provided by the employer. For example, if an employee hired for a project commits fraud or deception in their work, the employment contract will be lawfully terminated even if the project is not completed. Similarly, if the reason given by the employer for terminating the employment contract before the project is completed is not a lawful ground for termination under the Proclamation, the termination of the contract is unlawful.

In the dispute between Appellant Ethiopian Electric Power Corporation and Respondents Ato Eyob Mesele et al. (4 persons) (December 26, 2003 E.C., File No. 62370, Vol. 11), the appellant terminated the respondents’ employment contracts because they refused to sign a contract renewal. The court to which the suit was filed by the respondents, opposing the appellant’s action, ruled that the employment contract was unlawfully terminated and ordered their reinstatement, and the appellate court upheld this decision. The appellant filed a cassation appeal, claiming that the lower courts’ decisions contained a legal error. In its appeal, it argued that the respondents were hired for a specific task under Article 10(1)(a) for the Universal Electrification Access Project, and since they refused to renew their contract by presenting new contract terms, the termination of the employment contract was lawful.

The court, in examining the case, understood that the work was not completed because the appellant did not argue that the project work was completed. If its non-completion did not raise an argument, the court stated that “even if the work for which the respondents were hired is covered under Article 10(1)(a) as claimed by the appellant, there is no legal acceptance in the law to terminate an employment contract merely because they renewed or did not renew their contract or refused to renew it, as long as the project work is not stated to be completed.” The court rejected the appeal and upheld the lower courts’ decisions.

When the completion of a project is presented as an argument for the termination of an employment contract, the argument is primarily factual and must be proven by evidence. If the lower courts render a decision based on the failure of the party raising the argument to present sufficient evidence of completion, there is no basis for the Cassation Bench to review it again, as fact-finding is not within its jurisdiction. (Appellant Selfhelp Africa Huruta Project and Respondents Ato Abe Alemu et al., May 13, 2002 E.C., File No. 51505, unpublished).

Sometimes, the completion of a project raises a legal question beyond a factual one. A project may close before its scheduled time due to lack of funds or other reasons, may be canceled due to being unnecessary, or may be terminated due to external reasons. Regardless of the reason, if a project closes, is canceled, or is terminated before its scheduled time, it is not yet completed. However, since the employment contract cannot continue in the absence of the project, it is bound to be lawfully terminated for one of the reasons specified in Article 28 of the Proclamation.

The completion of a project also raises a contentious question in relation to the completion of the budget year. The budget year for projects funded by foreign donor organizations differs from our country’s budget year. A project that is to be completed within one budget year will be completed when that year ends. While this is largely true most of the time, it should not be forgotten that there are situations where budget and project years do not coincide. Therefore, to unequivocally confirm the completion of a project, it is better to rely on the project document’s timeline rather than the budget year as a starting point.

The problem caused by using the budget year as a starting point is clearly seen in Supreme Court File No. 57337 (Appellant Adventist Development and Relief Agency and Respondent Ato Gebeyehu W/Michael, June 15, 2003 E.C., Vol. 11, Vol. 9). The case reached cassation based on a suit filed by the respondent in the Federal First Instance Court, claiming unlawful dismissal and demanding various payments. The court ruled that the employment contract was for a definite period, lasting from July 2000 E.C., to December 2001 E.C., and therefore, the dismissal was lawful, rejecting the claim. The Federal High Court, which heard the appeal filed by the respondent, after hearing the arguments of both parties, reversed the lower court’s decision, stating that “although the employment contract was for a definite period, as long as [the respondent] was hired for the project work, and the project was said to be completed because the budget year and the work year were one year, the appellant did not present evidence regarding the completion of the project.”

Subsequently, the appellant took the case to cassation, arguing that the respondent’s employment contract was for a definite period, expiring in December 2001 E.C., and therefore, the dismissal should be deemed lawful. Additionally, it requested the court to overturn the decision that the project, being supported by the US Agency for International Development, would end in June despite its budget year ending in December, claiming that a fundamental legal error had been committed.

Accordingly, the case was examined with the issue of whether the employment contract relationship between the respondent and appellant was for a definite period or not. The court, in examining the file, noted that merely stating that an employment contract was made for a definite period does not make it a definite-period employment contract, and that it should be decided based on the nature of the work. Regarding the case at hand, the court stated that the appellant not only proved that the employment contract was for a definite period, but also that it was a project work supported by a foreign organization, and that it would continue only if the annual work activity was reviewed and the project was decided to continue, and that the budget year ended in December 2001. It further noted that this point was confirmed as a factual matter by the Federal First Instance Court after hearing evidence.

Subsequently, the court criticized the Federal High Court’s decision, stating that it had made an error in the confirmed factual matter, as follows:

“While the Federal First Instance Court, which has the power to receive and evaluate evidence, confirmed that the project’s budget year ends in December, the Federal High Court, without providing sufficient reason for reaching the conclusion that the budget year ends on June 30, 2001 E.C., in the absence of evidence from the respondent denying this, did not follow fundamental principles of evidence evaluation, and therefore, we did not find it acceptable.”

Although the court criticized and overturned the High Court’s decision in this manner, the overturning decision itself is not free from criticism. Firstly, the case was examined with an issue that was not contentious. In light of the lower courts’ decisions and the appellant’s cassation appeal, there was no issue from the outset that would warrant an issue of whether the employment contract relationship between the respondent and appellant was for a definite period or not.

The content of the Federal First Instance Court’s decision was that the employment contract was made for a definite period, and its termination was lawful upon the expiry of the period. The duration of the employment contract was also not changed in the High Court’s decision. The court accepted that the employment contract was made for a definite period. The conclusion that the employment contract was unlawfully terminated was reached by taking as a premise that, although the contract was for a definite period, no evidence was presented regarding the completion of the project, and that the budget year ended in June 2001 E.C., not December 2001 E.C. The appellant also did not file a cassation appeal citing a decision that the contract was made for an indefinite period. The content of the appeal was that the definite-period employment contract between the respondent and appellant was lawfully terminated, and that the project’s budget year ended in December 2001 E.C., not June 2001 E.C., and since the project was completed at that time, the termination of the employment contract should not be deemed unlawful.

Indeed, the court’s decision shows that in their response to the appellant’s appeal in the Cassation Bench, the respondent argued that although the employment contract stated a definite period, its applicability was based on the nature of the work for which they were hired, and that no evidence was presented in the Federal First Instance Court that they were hired for a project. However, since the respondent did not file a cassation appeal against the High Court’s decision that the contract was made for a definite period, there is no basis for examining the argument they raised in their response to the appellant’s appeal as a central issue.

Since the issue was not framed in terms of the project’s completion, the fundamental question of when the project for which the respondent was hired started and when it would end was overlooked without a clear answer. The decision states that the Federal First Instance Court, after hearing evidence, confirmed that the work for which the respondent was hired was a project work supported by a foreign organization, that it would continue only if its annual work activity was reviewed and the project was decided to continue, and that the budget year ended in December 2001 E.C. However, in the part of the decision that narrates the case’s origin, it is stated that the Federal First Instance Court reached a decision based on the expiry of the period, and there is no mention of these facts being discussed and confirmed by evidence. The file does not state how these facts, beyond the expiry of the period, served as input for the court’s decision.

Even so, the facts stated to have been confirmed, whether individually or collectively, do not lead to the conclusion that the project was completed. The fact that the project is supported by a foreign organization and continues only if its annual work activity is reviewed and decided to continue does not confirm the project’s implementation period, i.e., when it started and when it will end. Every project has its own start and end time (life cycle). If the funding body stops providing financial support before the project’s completion date, the project is terminated due to lack of funds, but it is not yet completed. This, in turn, terminates the employment contract of the employee hired for the project under Article 28 of the Proclamation, not Article 24(1). Similarly, unless there is a coincidence, the end of the budget year does not result in the completion of the project.

In both the High Court’s and the Cassation Bench’s decisions, the start and end dates of the project for which the respondent was hired were overlooked without being specified. The fundamental point was omitted, and the argument centered on our country’s budget year (June) and the foreign budget year (December), making not only the High Court’s decision but also the Cassation Bench’s decision vulnerable to criticism.

On the other hand, it should not be overlooked that there was an indication in the court’s decision that the project was not completed. That is, the appellant hired other people after the respondent was dismissed. Regarding this point, the court rejected it, stating that “hiring other people after the employment contract was terminated does not make the employment contract for an indefinite period.” As stated above, the issue of the employment contract being for a specific task was settled by the lower courts’ decision. In a situation where the respondent did not file a cassation appeal, being dissatisfied with the decision, the duration of the employment contract should not be taken as a central issue. The hiring of other people should also have been examined in relation to the non-completion of the project.